Success seemed assured early in life for Drew “Bo” K. Brownstein and Drew Peterson.

Both came from pedigreed Denver families. They attended the exclusive Kent Denver School in Cherry Hills Village, where they were star athletes.

Brownstein, son of Democratic Party powerbroker Norm Brownstein, interned for U.S. Sen. Ted Kennedy and, as an all-state lineman, led his football team to the state playoffs. After an attempt at college football, he studied finance, worked on Wall Street, earned a master’s degree in business administration at Columbia University and launched a hedge fund in Denver.

Peterson’s father, H. Clayton Peterson, headed Arthur Andersen’s Denver office throughout the 1990s. Drew Peterson was the top scorer on Kent Denver’s basketball team and was a standout soccer player. He attended the University of San Diego and became an investment adviser catering to well-heeled clients in Denver.

But one evening in April 2010, as the friends worked out together in a Denver gym, Peterson let Bo Brownstein in on a secret he had learned from his father, and they spoke later about it on the phone. The information they shared, and the money they made from it, would lead to an investigation that resulted in criminal charges against both men and Clayton Peterson.

On Friday, Bo Brownstein, 35, stood before a federal judge in New York and admitted he traded shares of Mariner Energy based on inside information, netting a profit of just under $2.5 million. Clayton Peterson, who sat on Mariner’s board, had told his son about a pending merger, and Peterson had shared the information with Bo Brownstein.

“A lifelong friend”

Under his plea agreement for one count of securities fraud, Bo Brownstein faces potential jail time of up to 46 months.

Peterson, 35, netted about $150,000 on his trades and has pleaded guilty to securities fraud and conspiracy. Prosecutors said in August that Peterson was cooperating on the Bo Brownstein investigation. That may reduce his potential prison time when he’s sentenced in January.

Clayton Peterson, who pressured his son to trade on the information but didn’t trade on it himself, pleaded guilty to securities fraud and conspiracy and was sentenced last week to two years of probation. His Vietnam War service and distinguished career played into the relatively light sentence.

Bo Brownstein was known on the Kent Denver Sun Devils for his size and his hard work. A lineman who played offense and defense, he was a team leader.

“I don’t know if anything rivals this sweet of a victory,” he told a reporter after the Class 2A team won its conference title in 1994. He said he relished “standing together and working toward a common goal.”

Recruited by Barnett

Northwestern University head coach Gary Barnett recruited the 6-6, 260-pound lineman to his Wildcat team, and he was part of the team when it went to the Rose Bowl at the end of the 1995 season.

“He was a big kid coming out of school with a pretty good reputation. He certainly qualified academically and seemed to be a good fit,” Barnett said Friday. “But he had back problems, and he couldn’t practice much.

“I knew his dad a little bit, and he was highly recommended. He wasn’t a for-sure Division I can’t-miss prospect,” he said. “College football was a little overwhelming for him. I don’t know whether it was tougher than he thought, but he had a tough go. Once he got there, it didn’t seem like he fit in.”

Brownstein transferred to UCLA. He joined the Bruins as a walk-on, but left shortly afterward due to health reasons, according to a source close to the family.

He studied political science and history and took a job after graduation with New York investment bank Donaldson, Lufkin & Jenrette, which was acquired by Credit Suisse First Boston in 2000. His work there included analysis of mergers and acquisitions, leveraged buyouts and other transactions.

In 2004, after receiving his master’s at Columbia, he moved back to Colorado to work as a vice president and analyst covering the business-services sector for Cambiar Investors, a Denver investment management company.

He launched his own hedge fund, Big 5 Asset Management, from a Cherry Creek office in 2008. The fund started with $50 million, and Bo Brownstein said at the time he hoped to grow it to as much as $1 billion.

The company’s main asset was Lion Global, a “global long-short equity fund” managed by Bo Brownstein.

Last year, Big 5 acquired another hedge fund operated by Lawrence Raiman, a real-estate investment specialist who had worked with Bo Brownstein at DLJ and Credit Suisse and also was one of his business school professors. Raiman continues to manage the renamed Rhino Income Opportunity Fund for Big 5.

Last March, Big 5 had $170 million in assets under management, with a clientele of other investment funds and wealthy individuals, according to a filing with the Securities and Exchange Commission.

Peterson’s profile was lower professionally. After attending the University of San Diego, he worked as an investment adviser for Private Capital Management, a Denver investment company run by former Boettcher & Co. chief executive Thomas Meade. He left the firm more than a year ago.

“More of a boy’s club”

Peterson managed money for Blind Seven LLC, an investing club started by him and a handful of his college buddies in 1999. The friends, who got together for an annual golf outing, each pitched in money, said Scott Samele of Scottsdale, Ariz., one of the Blind Seven members.

“It’s more of a boy’s club than an investment club,” said Samele, who estimated he put $50 a month into Blind Seven.

The club profited $19,000 from Peterson’s insider trading, according to court documents. But Samele said he had no idea what Blind Seven’s money was invested in, and he never received statements or checks.

“I’m trying to figure this out myself,” he said. “Drew’s a good guy. I don’t know what he did. It was an aberration if it happened the way some people said it did.”

This article has been corrected in this online archive. Brownstein was still on the Northwestern University team when it went to the Rose Bowl at the end of the 1995 season. He made the UCLA team but left shortly afterward for health reasons.

Denver Postee since 1998. Previously worked at Denver Business Journal, Littleton Independent and City News Bureau of Chicago. Colorado College and Columbia University grad. Knight-Bagehot fellow in 2007-08. Married to Marta. Two teen daughters. Ski, cycle, hike, climb, backpack, cook, read, travel.

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